Understanding Consumer AND Business Buyer Behavior PDF

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This topic reveals about the consumer behaviour. Which factors influences customers to think before buying products and what other information they need before spending their money....

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UNDERSTANDING CONSUMER AND BUSINESS BUYER BEHAVIOR PREVIEWING THE CONCEPTS – CHAPTER OBJECTIVES 1. understand the consumer market and the major factors that influence consumer buyer behavior 2. identify and discuss the stages in the buyer decision process 3. describe the adoption and diffusion process for new products 4. define the business market and identify the major factors that influence business buyer behavior 5. list and define the steps in the business buying decision process JUST THE BASICS CHAPTER OVERVIEW In this chapter, we continue our marketing journey with a closer look at the most important element of the marketplace—customers. The aim of marketing is to affect how customers think about and behave toward the organization and its market offerings. But to affect the whats, whens, and hows of buying behavior, marketers must first understand the whys. We look first at final consumer buying influences and processes and then at the buying behavior of business customers. INTRODUCTION Apple: The keeper of all things cool. Few brands engender such intense loyalty as that found in the hearts of core Apple buyers. Apple’s obsession with understanding customers and deepening their Apple experience shows in everything the company does. Apple’s keen understanding of customers and their needs helped the brand to build a core segment of enthusiastic disciples.

“To say Apple is hot just doesn’t do the company justice.” Apple is smoking.

CONSUMER MARKETS AND CONSUMER BUYER BEHAVIOR

Consumer buyer behavior refers to the buying behavior of final consumers—individuals and households who buy goods and services for personal consumption. All of these consumers combine to make up the consumer market. The American consumer market consists of more than 300 million people. The world consumer market consists of more than 6.8 billion people. Model of Consumer Behavior The central question for marketers is: How do consumers respond to various marketing efforts the company might use? The starting point is the stimulus-response model of buyer behavior. Marketing stimuli consist of the Four Ps. Other stimuli include major forces and events in the buyer’s environment: economic, technological, political, and cultural. The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black box, which has two parts. 1. The buyer’s characteristics influence how he or she perceives and reacts to the stimuli. 2. The buyer’s decision process itself affects the buyer’s behavior. Characteristics Affecting Consumer Behavior Cultural Factors Culture is the most basic cause of a person’s wants and behavior. Marketers are always trying to spot cultural shifts. Subcultures are groups of people with shared value systems based on common life experiences and situations. The U.S. Hispanic market consists of 46 million consumers.

The African American market has an annual buying power of $845 million and is estimated to reach $1.2 trillion by 2013. Asian Americans are the most affluent U.S. demographic segment. Mature consumers are becoming a very attractive market. By 2015, the entire baby boom generation, the largest and wealthiest demographic cohort in the country, will have move into the 50+-age bracket. Social Classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Social class is not determined by a single factor, but is measured as a combination of occupation, income, education, wealth, and other variables. Social Factors Groups and Social Networks. A person’s behavior is influenced by many small groups.

Opinion leaders are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert social influence on others. Th e s e10p e r c e nto fAme r i c a n sa r ec a l l e dt h i e nflue nt i a l so rl e a d i ng a d op t e r s . Marketers use buzz marketing to spread the word about their brands. Online social networks are online spaces where people socialize or exchange information and opinions. Family is the most important consumer buying organization in society. 70 percent of women hold jobs outside the home. Approximatley 65 percent of men grocery shop regularly. The nation’s 36 million kids age 8 to 12 control an estimated $30 billion in disposable income. Roles and Status. A role consists of the activities people are expected to perform. Each role carries a status reflecting the general esteem given to it by society. Personal Factors Age and Life-Cycle Stage. People change the goods and services they buy over their lifetimes.

Marketers often define their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage. Occupation. A person’s occupation affects the goods and services bought. Economic Situation. A person’s economic situation will affect product choice. Lifestyle is a person’s pattern of living as expressed in his or her psychographics. AIO dimensions are activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products). Personality and Self-Concept.

Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. A brand personality is the specific mix of human traits that may be attributed to a particular brand. One researcher identified five brand personality traits: 1. Sincerity (down-to-earth, honest, wholesome, and cheerful) 2. Excitement (daring, spirited, imaginative, and up-to-date) 3. Competence (reliable, intelligent, and successful) 4. Sophistication (upper class and charming) 5. Ruggedness (outdoorsy and tough) The basic self-concept (self-image) premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.” Psychological Factors Motivation. A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. Freud suggests that a person’s buying decisions are affected by subconscious motives that even the buyer may not fully understand. Motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Maslow sought to explain why people are driven by particular needs at particular times.

Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Selective attention is the tendency for people to screen out most of the information to which they are exposed. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe. Selective retention is the retaining of information that supports their attitudes and beliefs. Subliminal advertising refers to marketing messages received without consumers knowing it. Studies find no link between subliminal messages and consumer behavior.

Learning describes changes in an individual’s behavior arising from experience. A drive is a strong internal stimulus that calls for action. A drive becomes a motive when it is directed toward a particular stimulus object. Cues are minor stimuli that determine when, where, and how the person responds. Beliefs and Attitudes. A belief is a descriptive thought that a person has about something. Attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. The Buyer Decision Process The buyer decision process consists of five stages: 1. 2. 3. 4. 5.

need recognition, information search, evaluation of alternatives, purchase decision, and postpurchase behavior.

Need Recognition The buyer recognizes a problem or need. The need can be triggered by either an:

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internal stimuli or external stimuli.

Information Search Information search may or may not occur. Consumers can obtain information from any of several sources.    

Personal sources (family, friends, neighbors, acquaintances), Commercial sources (advertising, salespeople, Web sites dealers, packaging, displays), Public sources (mass media, consumer-rating organizations, Internet searches), and Experiential sources (handling, examining, using the product).

Commercial sources inform the buyer. Personal sources legitimize or evaluate products for the buyer. Evaluation of Alternatives

Alternative evaluation: how the consumer processes information to arrive at brand choices. How consumers go about evaluating purchase alternatives depends on the individual consumer and the specific buying situation. In some cases, consumers use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and rely on intuition. Purchase Decision Generally, the consumer’s purchase decision will be to buy the most preferred brand. Two factors can come between the purchase intention and the purchase decision. 1. Attitudes of others. 2. Unexpected situational factors. Postpurchase Behavior The difference between the consumer’s expectations and the perceived performance of the good purchased determines how satisfied the consumer is.

If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is said to be delighted.

Cognitive dissonance, or discomfort caused by postpurchase conflict, occurs in most major purchases. The Buyer Decision Process for New Products A new product is a good, service, or idea that is perceived by some potential customers as new. The adoption process is the mental process through which an individual passes from first learning about an innovation to final adoption.

Adoption is the decision by an individual to become a regular user of the product.

Stages in the Adoption Process Consumers go through five stages in the process of adopting a new product: 

Awareness: The consumer becomes aware of the new product, but lacks information about it.

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Interest: The consumer seeks information about the new product.

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Evaluation: The consumer considers whether trying the new product makes sense.

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Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value.

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Adoption: The consumer decides to make full and regular use of the new product.

Individual Differences in Innovativeness People differ greatly in their readiness to try new products. The five adopter groups have differing values. 1. Innovators are venturesome—they try new ideas at some risk. 2. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully. 3. The early majority are deliberate—although they rarely are leaders, they adopt new ideas before the average person. 4. The late majority are skeptical—they adopt an innovation only after a majority of people have tried it.

5. Laggards are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself. Influence of Product Characteristics on Rate of Adoption Five characteristics are important in influencing an innovation’s rate of adoption. 

Relative advantage: the degree to which the innovation appears superior to existing products.

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Compatibility: the degree to which the innovation fits the values and experiences of potential consumers.

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Complexity: the degree to which the innovation is difficult to understand or use.

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Divisibility: the degree to which the innovation may be tried on a limited basis.

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Communicability: the degree to which the results of using the innovation can be observed or described to others.

BUSINESS MARKETS AND BUSINESS BUYER BEHAVIOR

Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. In the business buying process, business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands. Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior. Business Markets Business markets involve far more dollars and items than do consumer markets. The main differences between business markets and consumer markets are in    1.

market structure and demand, nature of the buying unit, types of decisions and the decision process involved. Market Structure and Demand

The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does.

Business demand is derived demand—it ultimately derives from the demand for consumer goods. Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes. Business markets have more fluctuating demand. 2.

Nature of the Buying Unit

Business purchases usually involve more decision participants and a more professional purchasing effort. 3.

Types of Decisions and the Decision Process

Business buyers usually face more complex buying decisions than do consumer buyers. The business buying process tends to be more formalized. The buyer and seller are often much more dependent on each other.

Supplier development is systematically developing networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or resell to others. Business Buyer Behavior Within the organization, buying activity consists of two major parts: 1. The buying center and 2. The buying decision process. Major Types of Buying Situations

Straight rebuy: the buyer reorders something without any modifications. Modified rebuy: the buyer wants to modify product specifications, prices, terms, or suppliers. New-task buy: the company is buying a product or service for the first time. ystems selling is often a key business marketing strategy because many business buyers prefer to buy a packaged solution to a problem from a single seller.

In this situation, a buyer may ask sellers to supply the components and assemble the package or system. Participants in the Business Buying Process

Buying center is all the individuals and units that play a role in the business purchase decisionmaking process. The buying center is not a fixed and formally identified unit within the buying organization. Major Influences on Business Buyers Most B-to-B marketers recognize that emotion plays an important role in business buying decisions. When suppliers’ offers are very similar, buyers can allow personal factors to play a larger role in their decisions. However, when competing products differ greatly, business buyers are more accountable for their choice and tend to pay more attention to economic factors. Environmental factors include the current and expected economic environment, as well as shortages of key materials. Technological, political, and competitive developments can also affect business buyers. Culture and customs can also influence buyer reactions to the marketer’s behavior and strategies. Organizational factors are important because each buying organization has its own objectives, policies, procedures, structure, and systems. Interpersonal factors influence the business buying process. These can be very difficult to ascertain. Individual factors are involved as well. Each participant in the business buying process brings in personal motives, perceptions, and preferences. These are, in turn, influenced by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk. The Business Buying Process 1.

Problem recognition: The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a specific product or service.

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A general need description is generated to describe the characteristics and quantity needed of an item.

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The product specification includes the technical product specifications. Value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production.

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A supplier search is conducted to find the best vendors. The newer the buying task, and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers. The proposal solicitation is the stage in which the buyer invites qualified suppliers to submit proposals. Supplier selection occurs after the buying center reviews the proposals. An order-routine specification includes the final order with the chosen supplier or suppliers. Buyers conduct a performance review. This review may lead the buyer to continue, modify, or drop the arrangement with the seller.

5. 6. 7. 8.

E-Procurement: Buying on the Internet Companies can do e-procurement in any of several ways.    

They can conduct reverse auctions, in which they put their purchasing requests online and invite suppliers to bid for the business. They can use online trading exchanges, through which companies work collectively to facilitate the trading process. Companies can set up their own company buying sites. They can create extranet links with key suppliers.

Business-to-business e-procurement yields many benefits. 1. It shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. 2. It reduces the time between order and delivery. 3. It frees purchasing people to focus on more-strategic issues. The use of e-purchasing presents some problems. 1. It can erode decades-old customer-supplier relationships. 2. It can create potential security disasters....